SCRUM Portfolio Strategy Part 1

With increasing demand of sophisticated IT Products and and services every organization is thriving to meet the demands with its limited supplying potential. The invariance in supply and demand of IT Solutions forces organization manage products through a streamlined process known as Portfolio Planning. All organizations need to make economically sound decisions to manage their product portfolios. But to my surprise not many organizations have a well defined portfolio planning strategy, and even if they have they are fundamentally not aligned to the core AGILE principles. In this current topic I will throw light on some important portfolio planning strategies which can be applied to connect to a AGILE compliant portfolio planning process.

First lets try to understand what a portfolio is. Portfolio is simply a backlog of prioritized products. Portfolio can contain any on going products or newly envisioned products. The key output of a portfolio planning process is to select and prioritize the most value driven products.

Portfolio planning is a never ending process. We are responsible to manage a portfolio as long as we have products to implement and maintain. You might wonder who is responsible for planning portfolios?  Well in my opinion portfolio planning involves a set of key participants like Internal Stakeholders, Product Owners and Technical Experts. Internal Stakeholders are mostly business driven people who measure the value and economics of the products under the portfolio. Product owners being champions of their products play a key role in the portfolio planning process. Product Owners act as advocates of their products. Technical experts do participate in portfolio planning to ensure all organizational technical constraints are well factored in a portfolio planning process.

As I mentioned earlier Portfolio Planning is done for both active products and newly envisioned products. The inputs for active products in a portfolio plan comes from factors like customer feedback, updated cost, technical debts, scope, product road map, market research data which help in deciding the future of currently active products.
In case of newly envisioned products its usually the business case which feeds as an input for portfolio planning and to decide the future of the envisioned product. Factors like Cost benefit analysis, sales forecasts and budgeted financial statements influence the portfolio planning process.

The prime output of a portfolio planning process is the prioritized portfolio backlog, every portfolio planning process is driven through set of phases and strategies to achieve this prime output.

Agile Portfolio Planning Process Model:

Above figure illustrates the AGILE portfolio planning model which consists of 4 underlying activities:

1. Scheduling 
2. Managing Inflows
3. Managing Outflows
4. Managing In-Process

The above mentioned Portfolio planning activities are made up by 11 AGILE strategies as shown in the figure above. I will briefly introduce you to most of these strategies and how they are implemented to produce a well thought and economically fruitful portfolio backlog.

Scheduling
The three key scheduling strategies used in portfolio planning process are:

1. Optimize Life cycle profits: Reinertsen recommends using economic measurements like Life cycle profits to sequence the portfolio backlogs. Basically it involved understanding of which products aim to higher profits during its entire life cycle. Products are ordered and sequenced in the product backlog as per their life cycle profitability. 
2. Calculate cost of delay: Next strategic measurements comes with cost of delay. This accounts for the cost incurred in not considering the product as part of the portfolio. If two or  more products have same cost of delay measurement then the one with the shorter implementation cycle is chosen first. Calculation of Cost of delay is in itself a very complex strategic input which I will discuss in my next blog post.
3. Estimate for accuracy: To precisely schedule portfolio backlog items it becomes very important to consider the impact of cost of the product as this affects the overall life cycle profits of the product. Agile SCRUM believes in relative sizing of portfolio items and most of the organizations use techniques like T Shirt sizing( S,M,L,XL,XXL) to size their portfolio items. Relative sizing strategy helps in quickly and accurately sizing portfolio items and thereby eliminating wastes like coming to precised estimates which is not so helpful at the portfolio level. This also helps in making quick go/no go decisions for marketing teams. Example of T Shirt sizing : Extra-small (XS) $10K to $25K
   Small (S) $25K to $50K
   Medium (M) $50K to $125K
   Large (L) $125K to $350K
   Extra-large (XL) >$350K

Managing Inflows
Inflow strategies help in determining the rate at which products can be inserted into the product backlog and the rate at which they can be pulled out. They also help in product funding decisions by considering the economic aspects of the products.
The key inflow strategies can be summarized as follows:

1. Economic Filter
2. Arrival/Departure Rates
3. Embrace Opportunities
4. Plan shorter and frequent release cycles           

In  part 2 I will elaborate Inflows/Outflows and In process strategies and how they contribute in coming up with a well balanced enterprise portfolio.
Stay tuned !!!